An Arizona company owns Tuchman Cleaners now, but most people around Indianapolis still think of the dry cleaning chain as a native son.  I know I do.  Tuchman has been laundering and dry cleaning clothes here for more than sixty years.  It was sad learning that Tuchman's owner, National Dry Cleaners, has filed bankruptcy in Phoenix.  Tuchman, with its 30 Indianapolis locations, is being put up for sale as part of the bankruptcy plan.

In my bankruptcy blog ATA Business Bankruptcy Plan Blown To Bits, I explained that, in a business bankruptcy, debts are not discharged by the court.  Instead, assets are sold to raise funds with which to pay creditors. Part of the reason for any business to file bankruptcy is to "buy time", enough time to sell some of its assets.  In the case of ATA, the efforts to sell assets while keeping the business running did not work.  In More Companies Coming Out The Other Side of Bankruptcy, I talked about three companies which were able to reorganize through the bankruptcy process and continue to do business with their customers.  I'm hoping the National Dry Cleaners story will end that way as well.  Meanwhile, I'm rooting for Tuchman stores to keep open, perhaps under new ownership. National Dry Cleaners CEO Ken Lyng remarked that daily operations at Tuchman will not be interrupted.

Having served as a bankruptcy attorney in Indiana for more than twenty years, I've helped clients through each of these steps of the bankruptcy process.  As part of that process, a company or individual will file a statement about the reasons they chose to turn to the bankruptcy courts for help.  National Dry Cleaners lists increased energy costs, environment cleanup costs, and the general economic downturn as factors that hurt their business.  Although my work concentrates on personal bankruptcy and small business bankruptcy (rather than on national chains), there are many elements common to all cases of bankruptcy.  You'll notice that the three main causes cited by National Dry Cleaners have nothing to do with mismanagement, theft, or scandal.  In other words, the problems were not due to mistakes made by the leaders or employees of the company.  All the causes originated outside the company and were powerful enough to impact the company negatively.

I see this very often when I work with small business owners who are forced into bankruptcy through circumstances basically beyond their control.  Whatever the size of a business, even with dedicated efforts to run it well, it can be overwhelmed by outside forces. It's so apropos, in a way, for us, particularly those of us in Indiana who think of Tuchman as uniquely Hoosier,  to hope is that the bankruptcy process will help National Dry Cleaners make a "clean" start.

Scanning the entertainment section of the paper the other day, I noticed that the Broadway hit "The Wiz" is playing in Indianapolis.  Now, I was not yet born when this story began, but as a consumer bankruptcy specialist in Indiana, I know the very interesting and sad saga behind the show. It all started with the book upon which this wildly popular play "The Wiz" is based, "The Wizard of Oz", which was first published in the year 1900.  The then 44-year old author was L. Frank Baum, and he enjoyed enormous success with his book - for a time.  In fact, within the first two weeks of publication, the book sold 10,000 copies, and the first year sales totaled 90,000. Then Frank Baum decided to expand upon his success, producing a very expensive slide show with an orchestra based on Oz.  Unfortunately, neither of those ventures was well-accepted, and when that show closed, Baum was forced to file bankruptcy.

The supreme irony about this tale is that, several years after Baum died, Samuel Goldwyn bought the movie rights to The Wizard of Oz for $40,000.  Today, more than a century later, you and I can attend the new Indianapolis showing of "The Wiz", which has delivered millions of dollars in profits, but of course too late to benefit even the descendants  of the imaginative author of Oz.

Even though the seeds of this bankruptcy were sown several generations before my time, as the adviser to many small businesses that file bankruptcy in Indiana, I understand only too well what happened.  Business owners - all business owners - take risks.  They invest their time, their expertise, and often their life savings in ventures which they believe have a good chance of success.  But sometimes, factors beyond their control undermine their chances.  It might be a general downturn in the economy or in their particular field.  It might be a medical problem that struck the business owner or a family member, or even an expensive divorce.  Quite often, decisions that you and I, in hindsight, might agree were solid at the time, turned out not have been so good given later circumstances that could not have been predicted.  The bankruptcy court system is there to serve as a safety net for just those reasons.

Often, as part of my work as an attorney focused on consumer and small business bankruptcy, I find myself discussing a client's employee benefits from work.  Since I do my very best to keep up with developments in every area that can impact my clients, I read a journal called Employee Benefit Adviser. The July issue of this professional journal carries a very wise piece by Editor-In-Chief Robert Whiddon, called "Hope Is Not A Strategy". I was immediately attracted by the title, because, as I've stressed in so many earlier bankruptcy blogs, many small business owners keep hoping things will turn around for them.  Meanwhile, they put off putting some strategies into place that can help protect their assets in the event their business simply cannot survive.

I like Whiddon's attitude towards employee benefit planning and the advice he's giving employee benefit advisers: "We all fall into the hope trap.  We shouldn't anticipate or plan for failure, and it's important to tackle life each day with a sense of optimism.  But do we have specific plans to achieve the things we want to make happen?  'Sort of' and 'maybe' are too close to hope for my tastes."

I found these words particularly apropos for both my individual bankruptcy clients and my small business bankruptcy clients in Indiana.  The financial troubles that lead to bankruptcy and/or foreclosure on a home or business property very rarely happen overnight.  In fact, after almost twenty-five years of dealing with clients' personal and business finances through recessions and periods of booming growth, I find that it's usually a combination of factors, piling up over months and even over a period of years, that finally become too much for clients to handle on their own. 

The earlier in the process that I enter the picture as a bankruptcy adviser, the greater the number of options will remain open for us to use.  Too often the result of just waiting and hoping, I find, is that troubles tend (both literally and figuratively) to compound.  Even if bankruptcy or foreclosure becomes inevitable, those clients that began planning with me at the first signs of trouble ended up with more satisfactory results.
 
As Whiddon so aptly points out, hope is not a strategy.  The funny thing I've found, though, is that having a strategy in place ahead of time really does offer hope.

Being a bankruptcy lawyer in Indiana is all about help - giving help and finding help.  Lately, Indiana homeowners in many of the 38 counties I serve have been needing all the help they can get.  Columbus, in Bartholomew County, is one of the four cities in which I have bankruptcy law offices, and that area was one of the hardest hit.   In an earlier blog, For Flood Victims, FEMA Aid Can Help Without Hurting In Bankruptcy, I talked about the special aid offered through FEMA (Federal Emergency Management Agency), through the Small Business Administration, and through the Indiana Bureau of Motor Vehicles.

Helping clients avoid foreclosure on their home (whether they are renters or owners) often plays a large part in the assistance I offer through my four Indiana bankruptcy law offices. It's important for me to be familiar with all the resources available to clients facing possible foreclosure.  It was welcome news to me, therefore, when HUD (U.S. Housing and Urban Development) announced support for homeowners and low-income renters forced from their homes during the severe storms.  There are several varieties of help offered, but one of the most significant is that HUD is granting immediate foreclosure relief by granting a 90-day moratorium on foreclosures of FHA insured home mortgages.  HUD also urged loan servicing companies to offer loan modifications, re-financings, and to waive late charges.  What's more, HUD has a loan program for rehabbing homes that are salvageable. These relief efforts are being offered in almost all the counties I serve, but Columbus was certainly one of the hardest-hit , with hundreds of homes and dozens of businesses severely damaged or even totally destroyed.

Emerging from bankruptcy always involves rebuilding of financial lives.  Now, because of the flood damage, many of my clients will be involved in rebuilding of another sort as well.  By helping my clients locate and take advantage of all the different flood assistance resources, I'll be involved in their rebuilding process on both counts!

When a person gets behind in paying debts, creditors begin to take action. And, when that happens, as I've warned many times in earlier bankruptcy blogs, it's time for the debtor to take action, too.  Telephone calls at home and at work from creditors could be just the beginning.  Foreclosure proceedings may be started against a debtor's home.  Automobiles may be repossessed, along with other property.  If creditors obtain a court order they may garnish wages, put liens on property, even seize bank account.  Working with a bankruptcy attorney can help avert a good deal of the ensuing pain, provided steps are taken before matters become worse.

Despite some myths, most bankruptcies are very private affairs. The rare exceptions tend to involve well-known local business leaders or political figures.  These unfortunately cases serve as a reminder of how business failures can sink even the most experienced of entrepreneurs.

Sometimes the first episode of a story is a Chapter 7 business bankruptcy.  Then, sometimes, a personal bankruptcy filing will follow, especially if the business was involved in lawsuits and ends up losing in one or more of those.  In the background there might be tax issues compounding the problem.  With wages garnished to pay back taxes, it can be very difficult to catch up and begin to rebuild financially.  Although, as I explained in my earlier blog, It's The Business, Stupid!, corporations and LLC's can file bankruptcy without the owner himself filing, the cumulative effect of many business debts and back taxes owed can resulted in personal bankruptcy even for some very once proud business personalities.
As a bankruptcy attorney in Indiana specializing in both small business bankruptcy and personal bankruptcy, I'm saddened but not surprised when I encounter, in my work with clients,r the sequence of events I just described    Almost all small business owners' personal and business finances are closely intertwined.  In fact, a 2005 study published in the California Law Review reveals that more than 20% of personal bankruptcy filings are business-related.  The bankruptcy system is designed to provide a safety net and a fresh start in situations like this. For a free capitalistic system to work, entrepreneurs need to be willing to take risks.  The fact that there is a "last resort"  in place when the best efforts fail serves as encouragement to do just that.

Small businesses hit by the record flooding in our state may be at risk for insolvency.  In my earlier bankruptcy blog, Floods Of Trouble Can Cause Bankruptcies In Indiana, I explained that, if a business is structured as a corporation or LLC, the business itself can file bankruptcy independent of the owner.  On the other hand, sole proprietorships and partnerships would have only the option of individual bankruptcy.

Meanwhile, for business flood victims, the U.S. Small Business Administration is offering two types of loans that might help at least some business stave off bankruptcy.  First, Physical Disaster Loans of up to $1.5 are available to repair or replace damaged real estate property, but also equipment and inventory.  Second, Economic Injury Disaster Loans, also in amount up to $1.5 million, can help meet expenses the business would have paid had the disaster not happened.  Both types carry interest rates no higher than 4%.  The phone number of the SBA is 1 800 659 2955, and the website is www.sba.gov  sba.gov.      

While the level of flooding in Indiana this year was greater than for the past half-century, I, as a small business bankruptcy attorney in Indiana for almost half that time, have worked with hundreds of small businesses hit by storms, flooding, and fire during that time.  My advice for all business owners remains the same:  Begin just as soon as possible after the disaster to assemble your "comeback team", including your insurance professional, representatives of the SBA and other agencies that can help, and a bankruptcy attorney.  This is one time where a bankruptcy attorney may actually be the best person to help a business avoid bankruptcy, by coordinating negotiations with creditors and by providing critical legal advice.

Bankruptcy’s in the news – again, but this time it’s not the usual individual or small business involved with bankruptcy court.  And it’s not one of the big manufacturing companies, either.  I’ve been reading about two cities, Vallejo, California, and McCall Idaho.  As a bankruptcy attorney in Indiana, I’ve helped tens of thousands of people through the process of bankruptcy.  I don’t typically work with cities and towns, but with individuals, families, and small businesses.  The fact is, though, that cities and towns file for bankruptcy, too.  For most of our history in this country, cities and towns weren’t eligible for bankruptcy protection. During the Great Depression, when more than 2000 municipalities were forced to default on their debts during Roosevelt’s presidency, laws were enacted that allowed municipalities to file bankruptcy.  A new section of the bankruptcy code, Chapter 9, was approved just for municipalities. (In an earlier bankruptcy blog, Yes, Your Business Can File Bankruptcy Without You, I talked about Chapter 7, Chapter 11, and Chapter 13 for individuals and businesses.) 

The three main causes for bankruptcy among individuals are job layoff, unusual medical expenses, and divorce. In the past year, falling home prices and property destruction due to floods, storms, and hail damage have all added to the pain.  In the case of municipalities, the big three causes appear to be losing big lawsuits, mismanagement, and distress in the economy.  Just as with individuals, when a municipality’s credit rating declines, it has trouble getting new credit to use for expenses (meaning to provide regular services to the people who live there).

When a Chapter 9 bankruptcy is filed, there’s one major difference as compared with individual or business bankruptcy.  There’s no provision in Chapter 9 for liquidating assets and using the money to pay creditors, as would happen in other forms of bankruptcy.  Usually reorganizing debt (bonds issued by the municipality) means lengthening the maturity date of the bonds to buy more time for repayment, or reducing the interest rate on the bonds.  Since “something’s gotta give”, as the saying goes, essential services may be reduced in that city, county, or town, even cutting back fire and police staffing or reducing social services staff. Projects such as building new bridges or new schools will probably be put on hold.  Most important, a city filing bankruptcy carries a much worse stigma than a corporation or even an individual. Municipalities will try anything to avoid using Chapter 9.

The first large municipal bankruptcy was filed in 1991 by Bridgeport, Connecticut.  The largest Chapter 9 was Orange County, California in 1994. New York City came very close to bankruptcy in 1975, but with Congress’ help, never went over the edge. What’s happened in McCall is that they owe $5 million to a contractor for remedying environment concerns, and that contractor is suing to have the debt all paid now.  Meanwhile, in Vallejo, ongoing negotiations with the fire and police unions have exhausted the city’s reserve funds.

In both cases, the problems have been building for years, with each administration trying to stave off the inevitable.  Although, as I said, my everyday work is not with municipalities but with individuals, the news out of Vallejo and McCall reinforces my plea for people to deal with financial problems early on.  The earlier in the process people begin to strategize and take steps to mitigate the problems, the more options will be open to them.  I’m no doctor, but when it comes to bankruptcy, early treatment offers the best chance for a cure!

As I brought out in an earlier blog, Foreclosures Hit Even The Famous, even folks who were at one time very successful and wealthy have fallen on hard times.    I’ve been practicing bankruptcy law for close to twenty-five years, and one thing I’ve found is that, by the time clients come to see me to try to stave off foreclosure or to file a bankruptcy case for themselves or for their small business, they are under considerable strain.  They’re not feeling either healthy or energetic, and one of the reasons for that is they haven’t been sleeping well.    Having counseled with tens of thousands of debtors, I have a lot of empathy for the enormous burden of worry people feel, knowing that it’s keeping them up at night and hurting their health. 

That’s why I was very interested in a May 23rd feature in the Travel section of USA Today about hotels.  Marketing managers at hotels are coming to realize that, while a hotel can have great amenities, what they’re really all about is a great night’s sleep. Several resort hotels and spas are focusing on helping their guests achieve just that.  At a special suite at the Hotel Monaco in Chicago, guests can find neck pillows, bamboo sheets, sleep masks, a gentle waterfall, and a sound machine.  The Four Seasons Hotel Westlake Village near Los Angeles launched a “Sleep Well” program, with acupuncture, meditation sessions, ear plugs, foot warmers, and even teddy bears.  SpaTerre at La Playa Resort in Naples, Florida, adds a sunset beach ritual and relaxation massage sessions.  The manager there advises guests to lock their cell phones in the safe and check email no more than once daily.  At Kimpton’s 70 Park Avenue hotel in New York City, guests can call a “pillow librarian” to request one of 15 different types of pillows to induce rest, such as one filled with buckwheat hulls that’s supposed to stimulate acupressure points.

As I work with my clients, preparing to guide them through the bankruptcy court process or helping them negotiate with home lenders and other creditors, I help them understand the options that apply in their situation.  The clients, in turn, need to make some very critical business and personal decisions.  They’re trying to absorb new terminology: Chapter 13, Chapter 11, Chapter 7, short sales, deed in lieu of foreclosure, on and on.  At the very simplest level, clients need to locate and organize all their financial records.  In short, there’s a lot to handle. If ever there was a time for focus and sharp thinking, this is it.  But, without sleep, nobody can get focused.

As a bankruptcy attorney for so many years, I know that when it comes to bankruptcy, it’s the “Now what?” stage that really matters.  That’s the part where the clients put the legalities of bankruptcy behind them and begin to rebuild their lives.  But, in order to get to that more hopeful “Now what?” stage, my clients must muster all their strength to get through the “Now”.  Perhaps, along with all my law books, I should stock a “pillow library” in each of my four bankruptcy law offices.

In a story I read about the super-rich in U.S. News And World Report, the writer points out the differences between being rich today and being rich a thousand years ago.  Back then, the article explains, ".being rich involved very little money per se.  A person's wealth was calculated in land, slaves, chunks of gold, and jewels. Today, by contrast, wealth is almost always expressed in terms of money."   It's true, I realized.  We refer to rich folks as millionaires and to the very rich as billionaires, meaning how many dollars' worth of assets they have.

To me as a bankruptcy attorney in Indiana who deals every day with lists of assets and with dollars owed, the most fascinating part of the article was about how, nowadays, if you're a millionaire, "you could be anybody."  You might be a CEO of a corporation on the verge of bankruptcy.  Or, you might be a professional athlete or rock star.  You might have inherited your money, or won it in a lottery or on a TV game show.  Since there are more than four million millionaires in the United States, they represent a variety of paths to wealth.

I couldn't help thinking that, at the opposite end of the money spectrum, it's the same situation, but in reverse.  Bankruptcy filers might be people who consistently lived beyond their means and never "saved for a rainy day," But filers might just as well be families who were very careful with their money and then were hit with tremendous medical costs, perhaps in combination with a job loss that meant health coverage was lost.  The person filing bankruptcy might be a brave, hardworking entrepreneur whose small business just couldn't withstand all the negative forces in our economy right now, or a business owner who just didn't have the wherewithal to defend against a frivolous extended lawsuit. Or, it might be the owner of a business hit with a fire or storm damage or flooding. It could be someone who never finished high school and who couldn't compete in today's job market.  It might be a person with an alcohol or drug problem.  Then again, the bankruptcy filer could be someone who inherited a fortune and then blew it all.
 
In close to twenty five years of guiding my Indiana bankruptcy clients through the legal process of bankruptcy, I've seen all these situations.  I think sometimes that, as long as there are people, there will be some who achieve super-rich status and others who find themselves turning to the bankruptcy court system for help.  Truly - it could be anybody!

In “Rich Famous, and Stars of Prime Time”, a recent U.S. News and World Report discussed Oprah’s success and quotes Oprah herself: “If there’s a thread running through each show we do, it’s that ‘You are not alone’.” Reporter Amy Bernstein comments, “It is OK for Oprah’s viewers …to share their pain with her and to divulge their weaknesses because there is nothing she has not seen…”

As a bankruptcy attorney in Indiana for almost twenty five years, I hope to bring that same message to my bankruptcy clients and blog readers.  It’s absolutely true – it’s OK to share your pain and divulge your weaknesses because there’s nothing (at least it seems that way to me) I have not seen or heard in the area of finances and debts and the legal issues surrounding debts.  I like to say I’m in the “fresh start” business, helping my clients  focus on the future, on “What’s next?”, instead of focusing on regrets about the past.  And, whether it’s about foreclosure issues, or car repossession, individual bankruptcy, small business bankruptcy, or student loan debt, the message is the same – let’s focus on the “now” and on the future.

The magazine story says that “For Oprah, Martha, and the Donald, their first names are enough.”   Well, I know that even both names of Mark Zuckerberg aren’t enough for instant worldwide recognition, but that’s just fine.  My professional life is devoted to working at bankruptcy court and counseling tens of thousands of people in my offices around the state of Indiana, very far from the Silver Screen and the Golden Stage.  But my messages – they’re right up there along with Oprah’s:  “YOU ARE NOT ALONE.” And “THERE IS HELP’. 

To a financier or an IRS agent, the word "forgiveness" has a technical meaning.  When a debt you owe is "forgiven", you don't need to repay that loan (and you may owe income pay tax on that benefit).  In the bankruptcy process, certain debts may be "discharged", which means the person filing bankruptcy is excused from repayment of all or part of those debts.  Working as a bankruptcy attorney in Indiana for more than twenty years. I deal with the discharging of debts every day.  But, what I find so interesting and important about it all is this: While there may be a lot of discharging of debts going on around bankruptcy courts, what I'd really like to see a lot more of is forgiveness going on around bankruptcy clients and their friends, families, and associates. 

As you might imagine, by the time my clients come to see me about filing a bankruptcy case for themselves and possibly for their small business, they are under considerable strain. They haven't been sleeping very well, so they're not feeling very healthy or energetic. They are not in a very good state of mind to be making the kind of crucial decisions I'll be discussing with them.  In many cases, people cast blame.  There's a lot of blame put on spouses, on parents, on children, on partners.  Even worse, many bankruptcy filers expend energy blaming themselves for their situation.  None of this blaming helps the situation.  Trust me on this - I've counseled with tens of thousands of debtors from all walks of life - blaming always hurts, and it almost never helps.

Dr. Phil published Ten Life Laws.  Life Law #9 is, "There Is Power In Forgiveness".
Dr. Phil explains that hate, anger, and resentment are destructive, eating away at the heart and soul of the person who carries them."  He goes on to say, "Forgiveness is not about another person who has transgressed against you.  It's about you."

Recently, the Oprah Show featured the Forgiveness Project, a new charitable organization dedicated to the idea that "by listening to the voices of people who have experienced reconciliation and renewal, it is possible to see alternatives to endless cycles of violence, crime, and injustice in the world".  When it comes to the bankruptcy process, as I've often stressed in this bankruptcy blog, it's the "Now what?" part of the process that really matters, the part where people rebuild their financial lives.  By forgiving others - the government, the weather, the war, the partner, the spouse, and, most of all, forgiving themselves, people emerge from bankruptcy stronger than ever, eager to write "the rest of the story." Holding on to blame and resentment keeps people in the same old story forever.

Bringing you up to date on the ATA bankruptcy hearing, I emphasized how bankruptcy is a process with certain stages.  By now you know that, as a small business bankruptcy attorney, I need to stay on top of news about businesses in various stages of that process, so as to offer the most up-to-date legal and business advice to my Indiana bankruptcy clients. 

Three business stories from just the past week or two illustrate what I mean by "bankruptcy process".  The first story is about a 175-year old company called American LaFrance, or ALF, which is one of the oldest fire and emergency service vehicle companies in the U.S.. (One observation to make here  is that even very old and solid companies sometimes need to make use of the bankruptcy system.)  The bankruptcy court judge entered an order confirming ALF's Chapter 11 Plan of Reorganization, which means the company can emerge from bankruptcy.  ALF was "in bankruptcy" for less than 17 weeks. In an earlier bankruptcy blog I explained that the bankruptcy law is designed to treat all parties fairly. In the ALF case, 90% of the creditors supported its plan.

In Virginia, Movie Gallery, Inc. successfully emerged from Chapter 11 bankruptcy protection after restructuring its debt.  Movie Gallery, started with 97 stores thirteen years ago, is now the second largest North American video rental company in the country.  "Through this restructuring," explained the company chairman, "we have effectively addressed our financial and operational challenges."  In practical terms, all of Movie Gallery's existing common stock and bonds were cancelled, and under the bankruptcy plan, new common stock and bonds are being issued to unsecured creditors of the company.  Again, bankruptcy is a process.

Meanwhile, In Delaware bankruptcy court, Hilex Poly Company, the world's largest plastic bag company, announced an agreement with its creditors under a "voluntary" Chapter 11 reorganization plan. This means the company can continue to operate as usual while the debt restructuring is in process.  In this case, all obligations to customers could be fulfilled, and suppliers could be paid in full.  The mechanism used in this case was special financing from GE Capital and Morgan Stanley.  Once more, a process was put into play.

My work as a small business bankruptcy attorney in Indiana is to help each bankruptcy client business owner move through the process as smoothly as possible by adopting strategies that are best for that business, and then carrying through step by step towards a successful fresh business start.
 

A couple of months ago, I wrote about the ATA Airlines bankruptcy that completely shut down the company.  As a small business bankruptcy attorney in Indiana, I have an intense interest in stories about bankruptcy filings by Indiana companies.  As I counsel my small business bankruptcy clients, it's important to draw lessons from other companies that can help my clients avoid mistakes as they rebuild their businesses. Then, too, any time a company closes its doors, my individual bankruptcy clients can be affected.  Some may be laid off because they worked for ATA or perhaps for a company that was a supplier or customer of ATA. The decrease in employment opportunities will have an effect on how quickly my clients can get back on their feet financially following a personal bankruptcy. 

Here's the situation right now with ATA:  At the end of last month, a 341 meeting was held.  This is a special meeting, part of all bankruptcy cases, at which executives of the company are questioned about what caused the company to fail.  In my work as a bankruptcy attorney in Indiana, I am involved in the bankruptcy process.  I use that word "process" by design, because, despite the myths, bankruptcy is not a one-day "event", but an orderly legal process with different stages.  I was personally involved in drafting changes to the Indiana bankruptcy statutes, and I know that the process, while certainly not perfect, is designed to have the courts arrive at as fair a settlement as possible.  That means trying to be fair to both the business owner(s) and the creditors who are owed money.  It also means, in many cases, trying to "save" a business and allow it to continue to operate to retain as many of its workers as possible, and to serve its customers.

The ATA story is an especially sad one, in a way, because the company was founded right here in Indianapolis thirty-five years ago.  Many attempts were made to keep the company going.  These strategies included selling ATA to Georgia-based Global Aero Logistics, and taking on government contracts to transport troops. Then, along with other airlines, ATA was hit with spiking fuel prices.  When it lost its government contracts, the airline simply could not keep going. 

I think one lesson small business owners can learn from ATA is to start working on strategies at the very first signs of trouble.  Sometimes a sale or merger can improve the situation dramatically.  With ATA, it just wasn't enough.  When consumer travel began to fall off, ATA diversified into other areas of business, another good lesson for all small business owners.  Again, with ATA, it just wasn't enough. Adverse market conditions just proved too strong for the company to keep flying.  And that's exactly where the Indiana bankruptcy process comes in as a safety net.

As a bankruptcy attorney in Indiana who always has his ear to the ground and his eye on the post-bankruptcy rebuilding process, I count it a good day if I read news about new businesses moving here, plants opening or expanding, new technology being put to use.  All of us like to hear this kind of good news about Indiana, but, for me, there’s an extra dimension, because I know that business growth means jobs.  Jobs are a key factor for my clients as they re-construct their financial lives after bankruptcy.  A bad day for me brings news of plant closings, business failures, and foreclosures.  All of those things make it tougher for my bankruptcy clients to launch their fresh start.

If you go back to bankruptcy blogs I posted earlier this year, A Good News/Bad News Week In The Nation And In Indiana,  and Some Indiana Good News, With More To Come,  you’ll find a mixed bag of news about business, housing, and employment around the Hoosier state.  Here are some of the highlights of just the past couple of weeks:

Genesis Manufacturing in Fortville, a plastic welding firm, is expanding its facility after landing a new contract to make sterile covers for surgery instruments.  Genesis, by the way, creates the helmet pads for U.S. troops to protect against head injuries from land mines.  In Lebanon, U.S. Cold Storage is adding a 400,000 warehouse in the Lebanon Business Park, and plans for a rail spur from the nearby CSX Railroad line are underfoot. U.S. Cold Storage would be the first tenant in a 250-acre plot Duke wants to develop.  Meanwhile, in Noblesville, life sciences company Helmer, Inc. has moved into a new 72,000 square foot headquarters, adding 20 more employees and seeking more.

On the negative side, I was sad to read of the closing of the Frank E. Irish contracting company, whose president reported that tight credit and skyrocketing supply costs forced him to close, laying off 180 workers. 

It seems as if, every week, there’s been a pull and tug, with bad news about Indiana business on the one hand, good news on the other. Here’s what I’ve concluded about all this:  My individual bankruptcy clients will find themselves emerging from the legal filing process into a work climate that offers them many new opportunities.  But they must be prepared to keep up their education and job skills, and they must be flexible. Small business owners emerging from the bankruptcy process can also find many opportunities for profit, but they, too, will need to keep up with changing markets and a changing workplace.  In my work as an Indiana bankruptcy lawyer, I’ve put the emphasis on the “end of the story”.  I try to do all I can so that each of my clients emerges from the bankruptcy process saying, “Today is the first day of the rest of my life”.

Besides catching up with my spouse and kids, I try to use some part of each weekend to catch up on my reading.  A couple of weekends ago, I found food for thought on the editorial page of Indianapolis Business Journal.  As a bankruptcy attorney in Indiana, I try my hardest to stay on top of economic news around the world and especially developments here in our state (as you know if you’ve been a follower of this bankruptcy blog).  Knowing all I can about what’s going on helps me give very useful, individualized legal and financial advice to all my bankruptcy clients. 

Every so often in my reading, I come across a tidbit of wisdom that isn’t so much news, as it is a new way of viewing the news.  That kind of reading helps me as well, because it opens my mind to new approaches to current problems and different ways to view the future.  The IBJ editorial was one of those thought-provoking, new-way-to-see-it, kind of articles.  It was titled “Pricy fuel isn’t all bad”.

The editorial talked about all the ways in which Hoosiers are “getting with the program”, meaning how they are accepting the unpleasant realities of rising fuel costs, but then striking out to find new opportunities to solve the problem. For example, a $100 million venture capital fund is being started to invest in “clean” technology, meaning alternative energy and “green” (environmentally-friendly) research.  When some technologies turned out to be disappointing, in particular corn and soybean based fuels, Indiana research teams went to work on other solutions.  An aviation fuel is being made from plant byproducts.  Fuels are being made from animal waste.  A plant is opening to turn wind into electricity, and Indianapolis Power and Light recently struck a deal to buy wind power.  A plant in Greenwood is being completed to make auto parts that improve fuel efficiency in cars.  These businesses, plus many others, are creating new jobs in Indiana.

As I processed all this information, the thought that came to my mind was that, when facing challenges, we can choose to channel our thoughts in one of three ways. We can keep avoiding the issue, running from the facts.  Second, we can cry and moan to everyone about how terrible things are, throw blame around or, worse, get bogged down in self-blame.  Last – and here’s why I found the article inspiring – we can roll up our sleeves and start focusing on the “OK, so now what?”  Working every day with folks facing bankruptcy, I know that their choices are almost always these same three.  Running away from looming financial issues, whether business or personal or both, doesn’t help solve anybody’s problems.  Blaming problems on the economy, on employment problems, on politicians, on partners, or on oneself – none of this helps.  Whether it is Chapter 11 or Chapter 13 bankruptcy, whether it’s personal bankruptcy or small business bankruptcy, the purpose is offering a fresh start.  The real focus needs to be on the future, and on the solution rather than the problems.  In other words: “OK, so now what?”  

In an earlier bankruptcy blog, I shared some insights gained from reading a fascinating article in the Harvard Business Review on the subject of neuroscience.  As an Indiana bankruptcy attorney, I see evidence every day of my working life of the different ways in which people, and in particular small business owners, react to stress.

The author of the article, Dr. John Medina, is a developmental molecular biologist who works as a private consultant to business. ( Besides my being a very curious fellow, I'm on constant lookout for information that can help me serve my Indiana bankruptcy and financial counseling clients.)

I learned some very interesting things from "The Science of Thinking Smarter" article.  For instance, our brains are built to handle acute stress.  Any of us can probably have several truly stressful times, even during the course of one day, and handle those just fine.  But, as Medina points out, suffering stress over a period of months (and he specifically refers to bad marriages, hectic workplaces, and money problems as three protracted stressors) is something our brains just are not made to withstand.  Prolonged stress, according to Medina, causes the body to produce a set of hormones that disconnect the webbings between brain cells.  Overstressed people (and I can certainly vouch for this from seeing tens of thousands of people in my Indiana bankruptcy offices during the past twenty-plus years!) don't do math well, don't process language efficiently, and have poorer memories.

Think about this for a moment - math , language, and memory skills are exactly the skills needed to excel in business.  Plus, the three stressors Medina mentions - bad marriages, hectic workplaces, and money problems - are very often the precise three that lead to bankruptcy.  Dr. Medina admits that some people's genetic makeup seems to make them more resilient to stress.  However, stress in general is bad business for both bodily health and for the health of any small business.

As I've reminded you before - I'm no brain scientist.  I can relate, though, to the enormous relief expressed to me over and over again by clients once they have faced up to their financial realities and moved forward with filing bankruptcy.  Whew!  Now they can stop looking over their shoulders and start to look ahead.  It almost seems that the process of avoiding a decision is a lot more stressful than the decision itself!

In this bankruptcy blog I’ve been writing a lot about small business owners.  As a consumer bankruptcy specialist in the state of Indiana, I have learned over my many years of practice how intertwined business finances and personal finances are for almost all small businesses.  While, depending upon the business structure, it is possible for a business to file bankruptcy without the owner filing a personal bankruptcy, I still find that, nine out of ten, both the family and the business feel the pain when debts pile up.

That’s why I was so interested in a story I read in the  Indianapolis Star a couple of weeks ago featuring the Timms, who were just honored as Indiana’s Small Business Persons of the Year.  I know that many of you who read my Indiana bankruptcy blog are going through difficult financial times right now, and I thought this tale of survival against all odds might prove as inspiring to you as it was to me.

Almost five years ago, Cottage Garden, a sentimental gift making business, was on the brink of failure.  Owners Mark and Angela Timms had maxed-out credit cards and a line of credit they thought they could never repay.  Everyone was discouraged, from the owners to the Cottage Garden employees.  As if things weren’t bad enough, a tornado completely destroyed the Timms’ home.  It seemed as if the next step was a Going Out Of Business Sale!

But that’s not at all what happened.  The Timms let their employees know that everyone’s help was needed to save the business, and, using teamwork, save the business is exactly what they did.  Today Cottage Garden is the largest producer of sentimental music boxes in North America, with more than 600,000 boxes sold just last year!.

Can every business situation be saved with a combination of a positive attitude and teamwork?  Of course not!  Interesting thing, though - when business owners stop hiding from their difficulties and sit down with me to consider all the options (filing bankruptcy is just one of several options we discuss), that’s when the power of teamwork really kicks in. Suddenly the focus is not on what has happened, or what should have happened, but on what can happen from that point forward.    And, often, that focus on future action is the most startling and yet the most encouraging turn-around of all!

By now, unfortunately, we’re all used to reading and listening to news about bankruptcy across the U.S.. From major corporations down to the little folk, there’s no scarcity of stories about financial failure.  Of course, as both a small business bankruptcy attorney and a consumer bankruptcy specialist in Indiana, I see the up close and personal version of such bankruptcy stories every working day.

As sad as many of these stories are, I couldn’t help chuckling at the following “riddle” I received in an email passed along to me by a friend:

What company has a little more than 600 employees and has the following statistics:

 19  have been accused of writing bad checks.
117 have directly or indirectly been involved in the bankruptcies of at least two businesses. 
 71  cannot get a credit card due to bad credit ratings.
 21  are defendants in lawsuits.
  8  have been arrested for shoplifting.

(I wasn’t really prepared for this answer!)  It’s the 615-member British House of Commons, “the same group that cranks out hundreds of new laws each year to keep the rest of us in line,” adds the writer.

Now, I must say here that, though I have dealt with literally tens of thousands of bankruptcy filings over the past quarter century, almost never have I found the rest of the statistics listed in the email about the House of Commons members to be true of my clients:
  7  have been arrested for fraud.
 29  have been accused of spouse abuse.
   3  have done time for assault.
   4  have been arrested on drug-related charges.
 84  have been arrested for drunk driving in the past year.

Fact is, most of my Indiana bankruptcy clients, both the individuals filing Chapter 7 or Chapter 13 bankruptcy, or the business owners filing Chapter 11 or Chapter 13 cases, have simply been overwhelmed by forces beyond their control.  The safety net provided by Indiana bankruptcy law gives these people a chance at a fresh financial start.  

As you know by now, I'm an avid reader of all news that has to do with money matters.  My work as an Indiana consumer bankruptcy specialist for both small businesses and individuals makes it important for me to know as much as I can about what's going on in the world of lending and borrowing.  That way, I am better prepared to give the best and most current advice to my bankruptcy clients.  In my blog a couple of months ago, I wrote about a relatively new phenomenon, which is people paying their everyday bills, including grocery and utility bills, using credit cards. (You can now charge even a Big Mac at MacDonald's!)

Now at first glance, with all the people and the companies you read about that are filing bankruptcy because they couldn't pay their bills, you'd think credit card companies (and Visa is the largest) would be suffering because of having to write down so much uncollectible debt.  You might have been amazed to learn that just a little more than a month ago, VISA actually offered the largest IPO (initial public offering of stock) in our country's history!  And not only did the company choose to list their stock on the New York Stock Exchange during one of the worst times in the stock market that we've seen in a long while, the offering was unbelievably successful, raising almost $18 billion from investors!  The initial share price was $44.  (Remember that number, as I'll come back to it at the end of this blog.)

The thing many folks don't know about Visa is that it's not actually a credit lender at all - it's the world's largest credit card processor.  Big difference! Visa carries no consumer debt on its books.  The company makes all its money from fees for processing transactions.  And so, consumers using credit cards for everyday bills, (a bad sign of the times), is actually great news for Visa, because it has more transactions to process!

And what is Visa doing with all these billions of dollars it raised in the IPO?  It's buying back its own stock that it had sold to banks such as JPMorgan Chase, Bank of America, Citigroup, National City, and Wells Fargo.  Those companies do have lots of consumer credit on their books, and a hefty percentage of that debt is not getting paid back to them by consumers.  All those banks can really use the money.  And Visa?  In one month, their stock went from $44 to approximately $65!  For the mathematically challenged among us (OK, I confess!  I had to use a calculator.), that's 48% gain in one month.  Must be nice...

The ATA Airlines bankruptcy was a recent headline grabber (in fact, I wrote about it in an earlier blog), but another big name company, Sharper Image, had filed for Chapter 11 bankruptcy back in February.  It's interesting to compare the two situations. As a business bankruptcy attorney in Indiana these many year, I try to understand the factors that lead companies to struggle financially and finally to avail themselves of the safety net the bankruptcy courts provide.

Both ATA and Sharper Image had suffered through years of declining sales and bottom line losses.  Some particular factors that played a strong role in both companies'  difficulties were rising fuel prices, competition, and tightening credit (stricter credit requirements made it difficult for ATA to obtain money for needed updates and repairs to planes, and difficult for Sharper Image to open new stores and build inventory). 

In each case, however, there was one big "straw that broke the camel's back".  In the case of ATA, as I've written about earlier, it was losing the FedEx contract to transport military troops and supplies on ATA planes.  This had been the one profit center for the airline, and, without that source of revenue, the company was unable to go on.   Sharper Image's "straw" was different.  A series of class action lawsuits having to do with claims that their Ionic Breeze air purifiers did not produce promised results for consumers turned out to be highly expensive in terms of legal costs and negative publicity.  

In my bankruptcy law practice, I deal mostly with privately-held, small businesses, advising them on their financial strategies and helping them deal with debt issues. Since my clients' companies are not publicly held, their earnings (and their losses) do not appear in shareholders' reports.  By the time the owners of small businesses are talking to me, their companies have sustained losses for years.  Often they have faced some of the very same type of credit crunch and competitive challenges that ATA and Sharper Image encountered.  But, unlike the giants, these small businesses suffer in silence - and, often in secrecy - with the owners hoping for a miraculous turnaround.

One of the messages I hope this bankruptcy blog will bring to business owners is that it will be easier in the long run if they face up to difficulties at the first sign of trouble, creating a  strategy that allows for the possibility of filing bankrupcy, but at the very same time taking all possible steps to prevent debt problems from overwhelming the business.